Deadline warning as ministers split on energy deal

Federal and state ministers have run out of time to extend their talks on a national energy deal as a peak regulator warns that any further delay will leave the electricity grid without the stronger reliability rules it needs next year.

The warning heightens pressure on all sides to strike an agreement on the National Energy Guarantee at a crucial meeting on Friday amid a growing policy split that could destroy the plan.

Any delay to an agreement risks leaving the national electricity market without the reliability safeguards that are meant to be in place by July 1 next year, in time for future challenges including the closure of the Liddell power station.

Time is running out for Environment and Energy Minister Josh Frydenberg to strike a deal with the states.Credit:Alex Ellinghausen

Concerns over the looming deadline have been raised with the Turnbull government because of the need to draft the new laws and allow at least four weeks of consultation before Victoria enters caretaker mode on October 30.

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The chair of the Energy Security Board, Kerry Schott, confirmed the concerns to Fairfax Media in the wake of new calls from Victoria and the ACT for significant changes to the NEG, triggering talk of pushing back the deadline.

Illustration: Matt Golding

“It’s very important that we get the approvals that are needed this Friday and in the coming week,” said Dr Schott, who leads the peak group of energy regulators that devised the scheme.

“Otherwise it probably cannot be done because of parliamentary and election timetables – and the implementation is needed before the middle of 2019.”

Energy giant AGL has confirmed it wants to close the Liddell coal-fired power station in the NSW Hunter Valley in 2022, setting a timetable for regulators who want the stronger reliability rules in place at least three years before any closure.

An impasse is increasingly likely when federal and state energy ministers meet in Sydney on Friday, with the Turnbull government rejecting a Victorian demand to allow future federal governments to mandate deeper cuts to carbon emissions without needing a vote in parliament.

“We’re certainly not going down the path of regulation. These are targets that should be in legislation to provide investment certainty,” said Energy Minister Josh Frydenberg.

The government intends to introduce legislation for a 26 per cent cut to emissions in the electricity sector but Labor will need a higher target to meet its pledge to cut emissions across the economy by 45 per cent by 2030.

Using regulation rather than legislation to increase the target would spare a Labor government from seeking the support of the Greens or negotiating with a difficult Senate.

Mr Frydenberg rejected claims the NEG would hamper investment in renewable energy, saying there was no limit to renewables in the scheme and citing claims from solar and wind proponents about the falling cost of renewable power.

Signalling a political campaign on energy at the next state election, he challenged Victorian Premier Daniel Andrews to explain how a state Labor government would prevent blackouts or reduce electricity prices if it vetoed the NEG.

“While the Labor Party is talking about emissions, we’re focusing on prices,” Mr Frydenberg said.

The Victorian call for the target to be raised by regulation is one of four new demands reported by Fairfax Media on Wednesday, with another condition being that the target is set every three years, three years in advance.

Environment Victoria, a not-for-profit group that is not funded by the government, backed the state demands to improve the NEG, which it called a workable policy.

The ACT government, led by Labor Chief Minister Andrew Barr and featuring Greens member Shane Rattenbury as Climate Change Minister, is seeking changes so that a review is triggered immediately when emissions in the electricity sector come close to the target.

South Australian Liberal Premier Steven Marshall called on Mr Andrews to think about the people of his state.

“Do they want lower energy prices? Do they want a more reliable grid? If that’s the case, then he should be signing up on Friday,” Mr Marshall told Sky News.

Tasmanian Liberal Premier Will Hodgman said Labor and the Greens were “siding for political opportunity” in their objections to the NEG, which he said would keep power prices down.

A collapse in the talks this Friday would leave the Turnbull government with the option of taking the NEG as its energy policy to the next election, while federal Labor would need to reveal its alternative plan to achieve its 45 per cent emissions target.

Asked what mechanism Labor would adopt to cut emissions, Opposition Leader Bill Shorten said: “We haven’t given up on hoping that the states and federal government can resolve the system.”

The energy scheme needs unanimous support from all states and territories in the east-coast electricity grid as well as uniform legislation in each jurisdiction, putting the timetable at risk from any government entering caretaker mode.

Any delay until after the Victorian election on November 24 puts the timetable in doubt when the NSW state government goes into caretaker mode next year for an election on March 23.

The latest date for the next federal election is May 18, with an early election considered less likely since the Coalition’s defeat in last month's byelections.

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The legislation to enforce the NEG is meant to be passed by the South Australian Parliament by November and replicated by other states. A draft form of this bill is to be sent to all jurisdictions on Monday.

The 26 per cent target is enforced in separate federal legislation that Mr Frydenberg will outline to the federal Coalition party room on Tuesday, before confirming the details with state and territory ministers in a teleconference the same day.

Mr Frydenberg accused Mr Shorten of repeating a lie about the increase in power prices last year when the Opposition Leader claimed a $650 increase in energy prices for an average family.

Fairfax Media revealed on July 29 the power price claim was incorrect.

Victorian Energy Minister Lily D’Ambrosio said it was better to get the details of the national energy guarantee right than to hastily sign onto a flawed deal.

“We’ve been very clear to the federal government that we want to keep working on the national guarantee,” Ms D’Ambrosio told ABC Radio.

“It is absolutely important that we finally draw under the line under the anxiety around the lack of a consistent and long-term national energy policy.”

Ms D’Ambrosio said the August 10 deadline to sign on was a politically convenient one for the Turnbull government but irrelevant to the task of getting the details of the National Energy Guarantee right.

“It was a construct very much around maximising the political benefit to the federal government of potentially having an early election where they could tick off and say they’ve solved the energy issues,” she said.